How do business analytics apply to the CFO’s finance and accounting function? It is increasingly apparent that corporate accounting is evolving from its traditional role of collecting and validating data and subsequently reporting information to a more value-adding role of providing and supporting analysis for decision making. To be clear, the message here is not about accountants simply getting better with traditional financial analysis methods like cost-volume-profit (CPV) breakeven graphs and expense-to-sales ratios. The message here is about how accountants can use “deep analytics” to discover relationships to discern knowledge not previously made visible – to provide information to line managers for better decisions.
Accountants’ progress with analytics has been notable. With the recent explosion of available digital data, accountants are certainly getting better at measuring and reporting more. But are the measures and reports the most relevant ones? Do they answer critical questions to drive growth and profits? The upside potential to applying analytics with the accountants’ financial planning and analysis (FP&A) role is substantial.
As the CFO’s scope of responsibility broadens with more oversight and as CFOs become that “strategic advisor” so often written about, they now have the opportunity to become catalysts for introducing innovation and change. This can include leading transformational projects that increase efficiencies, lower costs, increase revenues, and better execute strategies. Accountants traditionally have been reactive to historical information. Business analytics enables them to help their organization be more proactive.
The trend clearly is toward increased use of business analytics and enterprise performance improvement (EPM) methods within the finance function. An example described in this IIA Research Brief is a shift beyond just reporting profitability by product and service line toward providing a more encompassing view of channel and customer profitability reporting using activity-based costing (ABC) principles. With this type of reporting business analytics can take decisions to a higher level by providing insights as to what factors differentiate higher from lower profit levels from a supplier’s customers other than just the customer’s sales volume with the supplier. Learn More